Health Insurance Tutorial

When I was 24 I had the honor and misfortune of landing a job as a customer service representative at a call center for a local health insurance company. I had left a lucrative but soul robbing job as a recruiter for a private technical college and was unable to find any other jobs that were not sales or recruitment related. After a 17 week training about how insurance works and how to use the company's complicated claims system and computer software I only lasted about four months. The major factor that did me in was being switched from answering calls from New Mexico doctors offices for benefit verification to taking member calls from Texas. You see, what I learned is that health insurance benefits depend largely on the state that you live in. Each state's legislature determines what benefits must be covered, how high deductibles can be and what is not covered. In Texas, the lowest deductible was $2,500 per person compared to NM's minimum of $500. In Texas, Women's Wellness visits-those once a year gems-are not covered. And if you have a child with special healthcare issues in Texas you have it the worst. Virtually nothing is covered that would benefit your child. That is why I watched in horror as Senator John McCain campaigned for president on a platform that suggested that we be able to buy insurance from different states. You see, what would have happened is that they would all move to a state like Texas or one with a comparable legislative makeup that would make insurance companies as little financially culpable to its clients as possible. You think we are in a healthcare crisis right now but that would have been a holocaust for the United States middle and lower class.

I say it was an honor because I have never had more of a useful training in my life. About two years after I quit that job I gave birth to a little girl who would rack up just under $1,000,000 in medical bills in her first year of life. One of her medications was $26,000 per bottle (treatment took 3 bottles). At one point we were looking at having to sell our house to pay $40,000 as a down payment on a surgery to save her life. Because I had some basic understanding of how insurance works I was able to navigate these systems and get my daughter the care she needed, keep my home, and not be plagued by medical bills. What I hope to provide you is with some very, very basic information that might help you to buy and understand your insurance and use it correctly.

Vocabulary Terms

Premium- You, your employer, or both pay a monthly premium. This is a set amount that you pay each month just to have insurance. It gets you an insurance card and access to the workings of your plan but that is all. Depending on your insurance company and the legislature of your state, this premium may rise every year or at anytime with little notice but likely will only change at the beginning of a calender year.

Allowed Amount: This is the amount that the insurance company is willing to pay for a service. For example, if a doctor charges the insurance company $135 for a 15 minute office visit and they are a participating provider that is contracted with the company has agreed to only get paid for $79.66. It is up to the doctor to "write off" the rest of the fee and they cannot charge you for it. If they are not a participating provider with your insurance company then they can charge you the left over amount of $55.34.

Co-insurance-You "split the bill" with your insurance company. It used to be that HMO's were exempt from this charge but in recent years they have added co-insurance to certain services. Co-insurance is most common for labs (blood work, x-ray, ultrasound) or anything classed as Durable Medical Equipment (DME-walker, crutches, wheelchair, nebulizer, orthotics, etc.).

Co-payment:This is a flat rate that is most common a fee for a 15 minute consultation with a doctor. There is a Primary Care Physician (PCP) fee which applies to a doctor that has the PCP certification. If you cannot get in to see your PCP and you see another person who is a participating PCP then you will get this rate. All other office visits with have a Specialists co-payment which is usually more expensive. If the specialist or PCP perform anything other than talking to you then depending on your plan you may be responsible to pay for those services. I will go into this more below.

Deductible- You are responsible to pay for all allowed amounts until you reach your deductible amount. For Example, if your deductible is $1,000 and you go the the same contracted doctor as the example above, you will have to pay $79.66. If you have a co-payment it is not included in the deductible. If you see a non-participating provider then only the allowed amount will apply to the deductible and they can still come after you for the leftover amount. Also, it is important to note that each person on your plan has THEIR OWN DEDUCTIBLE. Once deductible is met then, depending on the plan, you will likely have co-insurance up to an out of pocket maximum. Your deductible will reset every 365 days and you start all over again.

Out of Pocket Maximum: This is the absolute amount of money (excluding co-payments) that you will have to pay in a plan year. If we continue with the $1,000 deductible you rout of pocket max will likely be around $3,000 or may be as much as $6,000 if you are on a family plan.

Prior Authorization: Before you can get anything special, other than an office visit, your doctor must achieve prior authorization for the service. This is usually the cause for delays in scheduling important appointments. On March 12 my daughter's pediatrician submitted an URGENT request for an MRI of her brain. We are scheduled for that MRI on April 6th. Their idea of urgent and mine are a few weeks apart! Don't count on your provider or the testing facility to have it all taken care of. ALWAYS REMEMBER:  at the beginning of any appointment or test you sign a form that states that you are financially responsible.

In the next installment I will talk about my understanding of the different plans that you may find yourself with and some strategies to understand them and make decisions about how to best use them.